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Tuesday, February 7, 2017

WestRock Affirms Commitment to Paper – January 2017 M&A Activity

WestRock, the entity created by the merger of RockTenn and MeadWestvaco, enters the new year with a loud and clear affirmation of the company’s commitment to paper-based packaging. In a one-two punch, the company exited the plastic closures and dispensers and landed a solid strategic blow to competitors in the folding carton segment. The company shed its $556 millionHome, Health and Beautybusiness unit in a sale to Silgan Holdings. The divested unit engineers and manufactures triggers, pumps, sprayers and dispensing closure units. Silgan, the acquiring company, manufactures rigid metal and plastic containers as well as the closures and lids. The very next day WestRock acquired Multi Packaging Solutions, the $1.6 billion roll-up of folding carton and high-end packaging companies. The acquisition of Multi Packaging Solutions adds considerable depth to WestRock’s strength in the folding carton segment where it already operates vertically, making paper in its paperboard mills, offering design, technical assistance, prepress, and printing to global consumer product companies. The acquired company, established in 2005, private equity-backed Multi Packaging Solutions (MPS) has grown through consistent strategic acquisitions of folding carton, label, packaging design, specialty rigid boxes, gift card; acquiring companies that deliver high-end packaging solutions to the consumer products, personal care and healthcare markets where attractive branding matters. This focused growth strategy paid off when WestRock came calling and offered a price equal to 9.6 times trailing twelve-month adjusted EBITDA.

Wait a minute – did we just say a multiple of 9.6x on TTM? How does what is essentially a printing company achieve an exit multiple approaching double digits when many printers are offered (and accepting) a purchase price of 4.0 times trailing adjusted EBITDA. The key driver of the price paid was very likely the strategic fit that MPS represented for WestRock; simply put there are not many billion-dollar-plus companies in the folding carton segment available for acquisition. When the buyer is as big as WestRock ($14+ billion), it takes a sizable acquisition to move the needle; WestRock was clearly a highly-motivated buyer that was seeking to continue its growth through acquisition. The seller, MPS, was itself a very active acquirer, having recently completed two acquisitions (see The Target Report – November 2016), maintaining its own steady strategic course while showing a very respectable adjusted EBITDA of 14.8%. On the buyer’s side, WestRock enjoys the higher multiple that being a public company endows on successful companies, affording access to capital and the ability to pay more for acquisitions.Commenting on the high multiple it paid, WestRock reported that it expects synergies, savings and improvements that will lower the effective multiple to 7.1 times, but of course that’s speculative and accrues to the buyer only if achieved, while the seller knows they exited at a cool 9.6x multiple.

Commercial Printing – Diversified Services

Pat Patterson, CEO of direct mail and specialty envelope printer Colortree Group, acquired the company he has managed under the ownership of Boathouse Capital since it acquired his company Graphic Innovations in 2011, merging it at that time with another printing company to form the Colortree Group. Boathouse bolted-on a third printing company, Direct Impressions, in 2013, creating the current configuration (see The Target Report – January 2013).

In another successful exit from the printing industry for private equity, Bradford Equities sold Independent Printing of DePere, Wisconsin to trade-only printing company Ennis. The Texas-based Ennis sells exclusively through its distributor network and has executed a disciplined acquisition strategy of adding companies that print products in defined product categories such as bank checks or business forms. With 55 locations across 20 states, Ennis, which reported $544 million revenue, has appeared nine times in our deal logs over the past five and half years. In every transaction, Ennis has executed on its product-focused strategy by acquiring specialty printers: forms (five times), presentation folders, envelopes, tags, labels and promotional products. Independent fits right into the Ennis strategy with defined product offerings including forms, folders and presentation products.

OneTouchPoint, arguably the most viable candidate on the horizon to become the new national roll-up company in today’s commercial printing industry, announced the acquisition of Colorado-based FuseCreates, a commercial printing company that brings additional services, such as mailing, fulfillment, creative and data management to the existing operation in Denver. OneTouchPoint was acquired by private equity firm ICV Partners in 2014 with prior backing from Huron Capital Partners (see The Roll-Up Returns (to Commercial Printing), The Target Report, Sept 2014). The company appears to be accelerating its acquisition activity, having just acquired Cincinnati-based Print Management in November 2016.

Data Communications Management (DCM), based in Brampton, Ontario, announced a double-header with two simultaneous acquisitions, the smaller of which was Thistle Printing, paying $6.1 million for the $16.4 million commercial printer, a ratio of 37% of annual revenue (EBITDA was not disclosed). Announced at the same time, DCM paid $8.8 million for the $21.3 million retail display printing company Eclipse Color & Imaging, a slightly higher ratio of 41% times revenue. Back in the US market, where the market for retail display printing companies has been very robust of late, ColorDynamics of Allen, Texas acquired Superior Graphics, a retail display printing company in Dallas.

Bankruptcies and plant closures spiked up a bit in January, with two Ch. 7 liquidations, four Ch. 11 filings, and five non-bankruptcy closures. None of the bankruptcies filed were by major players and thus the spike may just be a clearing out of some weaker companies as the new year unfolds. One plant closure, however, struck a personal chord; the announcement that Cenveo was closing its Portland plant, formerly The Graphic Arts Center, a super-high-end printer known nationally for printing beautiful annual reports, automotive brochures and fashion catalogs. During the decade before the company was acquired by Cenveo’s predecessor company Mail-Well, I was working for a fine commercial printing company as a sales rep, later as VP of sales and finally as a company owner. On the rare occasion that we were up against The Graphic Arts Center, we knew that in that instance we were not competing on price; we were, at least for the moment, playing in the printing big leagues. They were that good.

About the Author of The Target Report

Mark Hahn is Managing Director and Founder of Graphic Arts Advisors. He assists company owners and management in the printing, packaging, mailing, marketing services, brand management, and related graphic communications industries, as well as their lenders, investors and shareholders in the following areas: mergers & acquisitions, sale of business, strategic and financial advisory, capital structure & funding, financial analysis, interim & turnaround C-level management and business valuations. Mark has over thirty five years’ experience in the areas of finance, operations, sales, mergers and acquisitions, and general management. Mark founded and eventually sold his own printing company, and has served as CFO, COO and other senior positions with several printing companies. He has served as financial advisor in turnaround situations when an owner or lender requires an objective and unbiased view of financial and operational results. Mark is regularly published and quoted in printing industry trade and management journals. He served as a volunteer for Court Appointed Special Advocates (CASA), providing oversight to the NJ Family Court on behalf of abused children.

GAA UPCOMING EVENTS:

Trends in Industry Consolidation

AWA Packaging Mergers & Acquisitions Executive Forum

Presented by Mark Hahn, GAA Managing Director

Monday, October 15, 2018

University Club of Chicago

In recent years, the packaging and converting industry has seen strong consolidation activity, as family-owned printing and packaging companies have acquired smaller competitors, while major private and public consolidators roll-up into multi-billion-dollar global packaging suppliers manufacturing multiple product types and bridging across several vertical market segments. Mark Hahn, Managing Director of Graphic Arts Advisors and author of The Target Report will provide insight and cover ongoing trends.

•What are the current market multiples – examples from real transactions.

GAA RECENT EVENTS:

Anatomy of the M&A Deal Process in the Printing Industry - The Gory Detail

Presented by Mark Hahn, GAA Managing Director

Sunday, September 30, 2018, 12:00 - 12:50 pm

Print 18 (Show Dates: September 30 to October 2, 2018)

Chicago, IL

The examination will cover teasers and other documents, what to look for in NDA agreements, finding the right prospective buyers and/or sellers, due diligence process, when to share the critical details such as customer names, the do’s and don’ts of earn-out provisions, the steps to finalize and close a deal, negotiating tips, and pitfalls to avoid when buying or selling a business.

In recent years, the printing industry has seen strong consolidation activity, as wide-format producers have acquired smaller competitors, and large, commercial printers have acquired wide-format companies to increase their competitiveness. Amid myriad announcements, it’s difficult to make sense of it all. Enter Mark Hahn, creator of The Target Report, who will provide insight and cover ongoing trends.

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Industry M&A Outlook, Review of Selected Transactions

Presented by Mark Hahn, GAA Managing Director

Tuesday, November 8, 2017Volume Mailers GroupDallas, TX

Presentation to peer group of leading direct mailing companies.

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Industry Observations on the Economic Recovery

Panel Discussion

Presented by Mark Hahn, GAA Managing Director

Tuesday, April 18, 2017Association of Corporate GrowthKenilworth, NJ

A provocative discussion by industry executives on whether we are in the midst of an economic recovery and to what extent. The ACG New Jersey Chapter has assembled a program of finance and corporate leadership and consultants who will comment on financing trends, investments, and acquisitions being made by businesses.

This session will guide attendees through a deep dive into the specific methodologies commonly used to value a printing business. We will discuss the factors that impact the value of your business, both positive and negative. Worksheet handouts will be provided to assist owners to prepare a valuation.

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Succession Planning - You Need to Start Now

Presented by Mitch Evans, GAA Director

Monday, September 26th, 2016

Graph Expo 16Orange County Convention Center, Orlando, Florida

90% of printing, mailing and graphics companies are family owned with most are under $10 million in annual revenue. A large percentage were founded in the 1970’s and 1980’s which means owners are at or nearing retirement age. Very few printing companies being passed down to the next generation unlike what happened with the previous generation.

This session will feature actual case studies of successful and not so successful succession plans. Mitch has worked with dozens of family owned printing companies in succession planning and transitions. You will learn:• Why do it now?• How is the business valued?• How will it be paid by the successor?• What are the tax issues?• How will control shift?• How do other family members view a transition?• How does it fit into estate planning?• What happens if real estate is involved?

In the first of two-sessions about buying and/or selling a business in the print industry, a panel of Investment Banker, Private Equity Partner and an industry-leading company executive discussed the factors that are driving the consolidation of the industry, the nuts and bolts of the deal process, and the qualitative and quantitative factors that affect business valuation. The seismic shifts occurring in the print industry with changes in demand, technologies, and services set the backdrop for a lively discussion which included facts about the current M&A market for companies in the printing and related industries.

Session II, Hands-On Workshop

In the second session, Rick and Mark guided attendees through a deep dive into the specific methodologies commonly used to value a printing business and discuss ideas on how attendees could increase the value of their business. Worksheet handouts assisted owners to prepare a valuation of their own business, and a due diligence checklist was provided for those planning to buy or sell a printing business to know what information will be needed.

The theme for 2015's event was "Strong Foundation for Focused Growth." The discussion focused on economic analysis of the prior recent 12 months as well as some projections for the following 12 months based on analysis of research into deal activity in the printing, packaging and related industries.____________________________________________

Seeking Direct Mail Printers - New York Metro, Mid-Atlantic regionGAA is advising a direct mail printing company seeking to grow by acquisition. Our client is interested in acquiring companies with revenues of $10 to $50 million.GAA is advising a direct mail printing company seeking to grow by acquisition.

Action Print in Des Moines, Iowa, Acquired by Universal Printing Services - COMPANY SOLDGraphic Arts Advisors served as advisor to Action Print on the sale.

Lamitech acquires Signature Food Boards division of General Die & Diecutting - DIVISION SOLDGraphic Arts Advisors served as advisor to General Die & Diecutting on the sale of its Signature Food Boards brand and business to New Jersey based Lamitech, Inc.

Commercial Printing / MSP Company / Seattle Area - COMPANY SOLDConducted a national search for a buyer of Print Management, a commercial printer in Tukwila, Washington. Obtained three purchase proposals. The successful buyer was an east coast printer that was seeking west coast clients and capabilities.

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The Target Report is Published by Graphic Arts Advisors, LLC

The Target Report is researched and published by Graphic Arts Advisors, LLC. The data presented is from publically available information sources, and is subject to change and independent verification. Graphic Arts Advisors, LLC and the authors make no representation that the information presented in this website is correct. Readers of The Target Report should independently check and verify any information contained herein and should not rely on The Target Report as the sole source upon which to base any decision or action.

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About The Target Report

Graphic Arts Advisors publishes The Target Report to provide an overview for buyers and sellers of businesses in the changing and evolving printing, packing, mailing, marketing technology and related industries.